'Asking yourself these 3 simple questions before investing will keep you away from any fraud'

None of the banks asks for credentials like bank customer ID, debit or credit card PIN or CVV number.

We are in the middle of World Annual Investor Week (October 5 to 11, 2020) and discussions on investors' protection, interest and confidence are all around. Ensuring investor's interest is one thing that should be engrained in the DNA of every institution in the financial services industry.

The financial services industry has a significant role in the overall development of our economy. At any point in time, we continuously deal with some of these institutions directly or indirectly. This vast industry is predominantly regulated by RBI, SEBI, IRDA and PFRDA. Each of these institutions continuously ensures efficient and smooth functioning of entities they regulate. More importantly, protecting investors interest is the top priority for these regulators and rightly so, we investors trust different institutions with our hard-earned money and we cannot let any fraud or scam erode this money which is invested for years and multiple objectives.

"Interest of the end investor is to be kept in mind because that is of paramount importance" is what Mr UK Sinha, Ex-Chairman of Securities and Exchange Board of India (SEBI) said during his tenure in one of his discussion. 'Har Investor Ki Taaqat' is a widely known SEBI's campaign that educates investors on how to make a well-informed decision at the time of investing. It also highlights how investors can avoid fraudulent avenues that misguide them with incorrect information.

Going back in history, SEBI was formed in the year 1988 and got statutory powers in 1992. In the year 1992, Harshad Mehta securities scam struck the stock market and investors. It was one of the biggest scams during that time. This scam is also known for the empowerment of SEBI that oversees all capital market participants work from development, regulation and protection perspective.

Over years there have been few occasions where people have committed frauds in the capital market by exploiting the loopholes or following malpractices. For nearly last three decades, SEBI as a regulator for the capital market has evolved and has regularly come up with regulations that kept fraudsters at the bay and protected the interest of investors.

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Harshad Chetanwala

Co-Founder|MyWealthGrowth.com

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The proactive nature of SEBI in coming up with regulations and implementing rules have helped build more confidence in investors and helping to increase participants in the market. Actions like dematerialisation of shares, changes in settlement period, due diligence requirement and reporting, audits, removing entry load in mutual fund, guidelines on expense ratios, making market participants and their executives more accountable, etc. have helped investors.

Investors today with information available through multiple sources and strong backing of regulators are more equipped to evaluate opportunities and threats of investing in any instrument and take the right decisions. While it has become increasingly difficult to follow malpractices and commit fraud in the organized sector, there are few Ponzi schemes from unorganised sectors which are not regulated. Unfortunately, they continue to lure investors with false commitments. We all as investors need to be cautious when we come across any investment option that promises exaggerated returns because the simple rule of higher the risk, higher the return applies to everything. Every additional return on any investment has risk and cost associated with it.

We should always do some due diligence before handing over our investment. Just look for the following information:
• Whom are we giving our money to invest
• Where our money is getting invested
• How (Not how much) our investment will generate return.

If we ask these questions for all our investments at the beginning, we are taking a firm step in protecting our own interest.

(Harshad Chetanwala, Co-Founder, MyWealthGrowth.com.)

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.